Download Retirement Assets Used As Reserves

Retirement Assets Used As Reserves Note: Impacted conventional loan programs include the following: Standard Agency (non‐AUS, DU, and LP), Agency Plus, and DU Refi Plus™. Before
Conventional Non‐AUS: •
Vested funds from individual retirement accounts (IRA/Keogh accounts) and tax‐favored retirement savings accounts (401[k] accounts) may be used as the source of funds for the down payment, closing costs, and financial reserves. •
The asset value is calculated as follows: •
Vested amount x 60% minus the outstanding balance of any loan(s). •
The borrower must provide all of the following: •
a complete copy of the most current retirement account statement identifying the borrower’s vested amount and the terms and conditions for loans or the withdrawal of funds, •
a copy of the check representing account funds (if funds are used for down payment or closing costs), and •
a copy of the deposit receipt where funds were deposited into the borrower’s account or a complete copy of the bank statement reflecting the deposit (if funds are used for down payment or closing costs). •
When funds from these sources are used for the down payment or closing costs, any applicable withdrawal penalties, or income tax must be subtracted so that only the “net withdrawal” is counted. •
When funds from these sources are used for financial reserves, the funds do not have to be actually withdrawn from the account. •
When a retirement account only allows withdrawals in connection with the borrower’s employment termination, retirement, or death, these funds should not be considered. Fannie Mae DU: Conventional non‐AUS guidelines apply. Freddie Mac LP: •
Vested funds from individual retirement accounts (IRA/Keogh accounts) and tax‐favored retirement savings accounts (401(k) accounts) may be used as the source of funds for the down payment, closing costs and financial reserves. •
Streamlined Accept ‐ Provide the most recent statement reflecting: •
the vested balance or the percent of vesting, •
any outstanding loans, •
the ending balance as of the end of the statement, •
conditions under which the funds may be withdrawn or borrowed, and •
retirement accounts may be counted at 60% of the vested balance minus any outstanding loans against the asset. If the assets are needed for closing, provide proof of liquidation. •
Standard Accept ‐ Provide the most recent two (2) months statements reflecting: •
the vested balance or the percent of vesting, •
any outstanding loans, •
the ending balance as of the end of the statement, •
conditions under which the funds may be withdrawn or borrowed, and •
retirement accounts may be counted at 60% of the vested balance minus any outstanding loans against the asset. If the assets are needed for closing, provide proof of liquidation. After
Conventional Non‐AUS:
•
Documentation of the terms of withdrawal for all retirement accounts is required. •
In order to be considered as effective reserves, retirement accounts must be vested and allow withdrawals, regardless of current employment status. •
Vested funds from individual retirement accounts (IRA/SEP/Keogh accounts) and tax‐favored retirement savings accounts (401[k] accounts) may be used as the source of funds for the down payment, closing costs, and financial reserves. •
The asset value is calculated as follows: •
If the retirement assets are in the form of stocks, bonds, or mutual funds, in order to be considered for reserves, the account must be discounted by 30% to account for market volatility. In addition, if the borrower is not at retirement age (typically 59 ½) and will be assessed an early withdrawal penalty, that penalty (10% unless confirmed otherwise) must be added to the discount for a total discount of 40%. If the borrower is at or above retirement age, the additional 10% penalty does not need to be applied. •
The borrower must provide all of the following: •
a complete copy of the most current retirement account statement identifying the borrower’s vested balance or the percent of vesting, any outstanding loans, the ending balance as of the end of the statement, and conditions under which the funds may be withdrawn or borrowed, •
a copy of the check representing account funds (if funds are used for down payment or closing costs), and •
a copy of the deposit receipt where funds were deposited into the borrower’s account or a complete copy of the bank statement reflecting the deposit (if funds are used for down payment or closing costs). •
When funds from these sources are used for the down payment or closing costs, any applicable withdrawal penalties, or income tax must be subtracted so that only the “net withdrawal” is counted. •
When funds from these sources are used for financial reserves, the funds do not have to be actually withdrawn from the account. Fannie Mae DU: Conventional non‐AUS guidelines apply. •
Lenders must manually apply the value of the asset(s) outside of DU. Freddie Mac LP: •
Documentation of the terms of withdrawal for all retirement accounts is required. •
In order to be considered as effective reserves, retirement accounts must be vested and allow withdrawals, regardless of current employment status. •
Lenders must manually apply the value of the asset(s) outside of LP. •
Vested funds from individual retirement accounts (IRA/SEP/Keogh accounts) and tax‐favored retirement savings accounts (401[k] accounts) may be used as the source of funds for the down payment, closing costs, and financial reserves. •
The asset value is calculated as follows: •
If the retirement assets are in the form of stocks, bonds, or mutual funds, in order to be considered for reserves, the account must be discounted by 30% to account for market volatility. In addition, if the borrower is not at retirement age (typically 59 ½) and will be assessed an early withdrawal penalty, that penalty (10% unless confirmed otherwise) must be added to the discount for a total discount of 40%. If the borrower is at or above retirement age, the additional 10% penalty does not need to be applied. Page 1 of 2 Last Revision Date: 03/29/13 (Correspondent) Retirement Assets Used As Reserves Note: Impacted conventional loan programs include the following: Standard Agency (non‐AUS, DU, and LP), Agency Plus, and DU Refi Plus™. Before
Freddie Mac LP, (continued): •
When funds from these sources are used for financial reserves, the funds do not have to be actually withdrawn from the account. •
When a retirement account only allows withdrawals in connection with the borrower’s employment termination, retirement, or death, these funds should not be considered. After
Freddie Mac LP, (continued):
•
Streamlined Accept documentation requirements are as follows: •
Most recent statement reflecting the vested balance or the percent of vesting, any outstanding loans, the ending balance as of the end of the statement and conditions under which the funds may be withdrawn or borrowed. •
If the assets are required for closing, proof of liquidation. •
Standard documentation requirements are as follows: •
Most recent two months statements reflecting the vested balance or the percent of vesting, any outstanding loans, the ending balance as of the end of the statement and conditions under which the funds may be withdrawn or borrowed. •
If the assets are required for closing, proof of liquidation. •
When funds from these sources are used for financial reserves, the funds do not have to be actually withdrawn from the account. Page 2 of 2 Last Revision Date: 03/29/13 (Correspondent)